IRS Crypto Audit: What You Need to Know About Tax Compliance and Crypto Reporting
When you buy, sell, or trade cryptocurrency, the IRS crypto audit, a tax enforcement action by the Internal Revenue Service targeting unreported crypto gains. Also known as crypto tax investigation, it’s not a scare tactic—it’s happening right now to people who ignored their crypto tax obligations. The IRS doesn’t guess. They get data directly from exchanges like Coinbase, Kraken, and Binance. If you sold Bitcoin for profit in 2023 and didn’t report it, they already know.
The crypto tax compliance, the legal requirement to report cryptocurrency transactions to tax authorities isn’t optional. Every trade, every airdrop, every staking reward counts as taxable income or capital gain. Even swapping one coin for another—like ETH for SOL—is a taxable event. The IRS crypto reporting, the process of disclosing crypto activity on Form 1040 and Schedule D has become as routine as reporting wages. Missing it means penalties, interest, or worse—audit notices that arrive with no warning.
What makes people vulnerable? Ignoring small transactions. Thinking "it’s just a meme coin" or "I didn’t cash out" means nothing to the IRS. They track wallet addresses, chain movements, and exchange transfers. If you got a QBT airdrop, a token distribution from the BSC MVB III event in 2021 and didn’t report its value at receipt, that’s taxable income. If you traded CANDY tokens, a travel rewards token tied to TripCandy’s platform and made a profit, that’s a capital gain. The IRS doesn’t care if you used it for booking a flight or held it for 30 days—they care if you made money and didn’t pay taxes on it.
There’s no magic fix. You can’t delete your wallet or pretend it never happened. The safest move is to track every transaction, calculate gains and losses accurately, and file correctly. Tools exist to help, but the responsibility is yours. And if you’re already behind? Amending past returns is better than waiting for a letter. The IRS crypto audit isn’t about punishing users—it’s about closing the gap between crypto’s anonymity and tax law’s clarity. The posts below show you exactly how others have handled this: from real audit experiences to how global rules like CRS and FATCA now tie into your crypto activity. You’ll see what triggers red flags, what records to keep, and how to avoid becoming the next headline.
When to Consult Legal Counsel for Crypto Tax and Compliance
Know when to call a crypto tax lawyer before the IRS audits you. Learn the red flags, legal risks, and how to avoid penalties with early legal help for crypto compliance.
- August 7 2025
- Terri DeLange
- 19 Comments